South Korea Report Thomas Kalinowski, Sang-young Rhyu, Aurel Croissant (Coordinator) Sustainable Governance Indicators 2020 © vege - stock.adobe.com Sustainable Governance SGI Indicators SGI 2020 | 2 South Korea Report Executive Summary At the close of the one-year observation period in November 2019, President Moon Jae-in had reached the middle of his term, with his administration facing increasing headwinds. Many of its signature achievements, such as the increased minimum wage and a work week shortened to 52 hours, have come under growing criticism from large sectors of the population and from business interests. Measures seeking to curb rising real-estate prices in Seoul and address the country’s high private household debt levels have also been criticized as ineffectual. The further implementation of Moon’s campaign pledges (“100 policy tasks”) remains a major challenge, particularly because the government has lacked a majority in parliament. In 2019, a seemingly low-profile effort to reform the prosecutor’s office turned into a major political struggle. President Moon used his presidential privilege to appoint law professor and former civil society activist Cho Kuk as justice minister despite the lack of approval from the parliament, with lawmakers expressing concerns regarding Cho’s and his family’s ethical conduct. Cho has long had a goal of reforming the prosecutor’s office, and of transferring the power to investigate corruption among high-level government officials from prosecutors to a planned new government agency. However, this political agenda became intertwined with investigations against him and his family, with massive street demonstrations taking place both for and against him. Ultimately he had to resign as justice minister in October 2019, after just two months in office. This controversial nomination helped expose a serious problem with regard to how high-level officials are groomed and recruited. It also illustrates a long-standing problem with political struggles in Korea, which tend to be highly personalized rather than focusing on political issues. While Korea is one of the few successful democracies in East Asia and has an active civil society, the legacy of the dictatorial past can still be felt. The National Security Law and related laws still limit freedom of expression, association and assembly. In general, the society remains organized in a hierarchical way that perpetuates the polarized power struggles between elite blocks, and makes it difficult to practice everyday democracy. SGI 2020 | 3 South Korea Report Despite the challenges from a weakening global economy and increasing tensions in trade relations, Korea is still doing relatively well in cross-OECD comparison. Growth rates are above the OECD average. Korea is a major exporter with a strong current-account surplus, and is home to many highly competitive multinational corporations that produce a great variety of products that are competitive on the world market. However, this export dependency also leaves the country vulnerable to global market volatility and growing protectionist tendencies. President Moon has tried to address this problem by promising a transition from an export-led growth model to an income-led model. While he initially implemented bold measures increasing the minimum wage, expanding public employment and improving the social-welfare system, the administration has over time proved more receptive to business-sector lobbying, and has backtracked from some of its original promises. While the overall unemployment rate remains low, the labor-market participation rate remains below the OECD average. Youth unemployment, precarious working conditions, exploding housing prices and old-age poverty are among the country’s most serious social issues. Social welfare and environmental sustainability remain problematic policy areas in which Korea still needs to catch up with OECD standards. Particularly with regard to the transition to a carbon-neutral economy, Korea is falling ever further behind the leaders in this field. With regard to international relations, President Moon has been focusing on improving relations with North Korea. This has to some extent been successful, as tensions are today much lower than under previous governments. However, tangible improvements in political and economic relations remain very limited, as neither a peace treaty nor a normalization treaty between the North and South has materialized. It seems that President Moon’s focus on summits with the North Korean leader has achieved diminishing returns, particularly as North Korea has shifted its attention to direct meetings with U.S. President Donald Trump. Beyond the North Korea question, South Korea’s international engagement remains underdeveloped, for example with regard to important issues such as climate change, poverty in the global South, and a fairer global economic and financial system. SGI 2020 | 4 South Korea Report Key Challenges At the domestic level, the biggest immediate challenge for the Moon administration remains the need to deliver on its numerous campaign. The parliamentary elections of 15 April 2020 – dominated by the COVID-19 pandemic – were crucial for President Moon, as winning a parliamentary majority for his party improved his chances of being able to deliver on his agenda, though the pandemic will strain the government’s ability to fulfill key promises regarding reducing social inequality, deepening democracy and curbing real-estate speculation. The initiatives that have been implemented, such as the minimum-wage increase and the increase in real-estate taxes, have thus far failed to make Korea a more just society. For this reason, if he is to achieve his goals, existing initiatives will have to be improved, and new bolder measures will have to be implemented. However, the government has in fact seemed timid in many areas, backtracking quickly when its policy proposals have been criticized. Moreover, it has seemed to count on the success of its North Korea policies, a dangerous tactic given the unpredictable character of the North Korean regime. Though key macroeconomic indicators in South Korea remained robust as of the end of the review period, the country’s dependence on exports leaves it vulnerable both to global economic volatility and external political conflicts. By the close of the period, several observers had adjusted their forecasts for 2019 growth to 2% or less, which is very low by historical standards in South Korea. The tide of global trade protectionism, the U.S.-China trade war, rising interest rates in the United States and the spreading currency crises in emerging economies all pose serious challenges for the South Korean economy. Domestically, the biggest economic challenges are to enhance social mobility and improve job conditions for non-regular workers and the younger generation. In addition, household debt levels and the continuing speculation in the real-estate market pose major challenges to social cohesion and life satisfaction. As a human-rights lawyer, expanding civil rights and deepening democracy are important goals for President Moon; however, overcoming residues of authoritarian rule such as the National Security Law, persistent discrimination and restrictions on the freedoms of expression and association SGI 2020 | 5 South Korea Report remains a difficult challenge. For example, it remains to be seen whether Moon will ultimately be able to deliver on his often-repeated promise to ratify the remaining International Labor Organizations (ILO) conventions on the freedom of association and forced labor. Amid a trend toward a more timid and business-friendly approach, it appears unlikely that Moon will be able to implement bolder policies. Several long- term tasks remain important, including addressing the challenges posed by an aging society, making the transition to a more multicultural society, restructuring the country’s dominant business conglomerates, strengthening small and medium-sized enterprises (SMEs) and improving the current low levels of labor productivity. While the threat from North Korea seems to be diminished given the recent improvements in the relationship, the volatile character of leadership in the North – as well as in the United States – offers no guarantee against sudden reversal. Given the lack of regional institutions and the United States’ increasingly unilateral approach, it will not be easy for President Moon to institutionalize the peninsular peace process progress in the form of a peace treaty and other mechanisms able to stand the test of time. North Korea remains a serious military threat; but even beyond this issue, conflicts with the United States over trade relations and military cooperation will remain a burden for the government. Conflicts with Japan over the recognition of Japanese crimes during the colonial period, as well as over trade-related issues, will most likely persist, as the Japanese government under Prime Minister Abe has shown itself willing to use tensions with South Korea and the threat from North Korea for domestic purposes. As the world’s seventh-largest emitter of greenhouse gasses and an underperformer in the transition to a carbon-neutral society, South Korea will be closely watched when it announces its new climate goals in 2020. As a member of the G-20, Korea may ultimately be asked by its partners to show more leadership in combating world poverty, and in creating a more stable and sustainable global governance system. Citation: